BlueStar New Materials: Does Its Best        


BlueStar New Chemical Materials Co., Ltd. (SH: 600299) was established in 1999 and was listed on the Shanghai Stock Exchange in 2000. The company is headquartered in Beijing with nine affiliated production bases, spreading over Jiangxi, Wuxi, Tianjin and other areas.
   The main businesses of BlueStar New Chemical Materials include silicone series, phenol, acetone, bisphenol A, epoxy resin, engineering plastics, butene, butadiene, chloroprene rubber, titanium dioxide, maleic anhydride and phthalic anhydride. The company's biggest shareholder is China National BlueStar (Group) Co., Ltd. (BlueStar Group), holding 53.96% share.
    In 2008, the annual revenue of BlueStar New Chemical Materials amounted to RMB8.02 billion, up 1.48% over 2007, but its net profit was negative RMB160.72 million, a 136.23% decrease compared to 2007. During the first quarter of 2009, the company lost RMB120 million. Till now, there are still no apparent signs of recovery of its main businesses.
BlueStar Group, a group under China National Chemical Corporation, focuses on new chemical materials and special chemicals. It holds shares of three publicly listed companies: BlueStar Cleaning Co., Ltd. (SZ: 000598), BlueStar New Chemical Materials and Shenyang Chemicals Co., Ltd. (SZ: 000698). Recently, BlueStar sold its entire stake in BlueStar Cleaning. However, there are various indications that the group will buy back the primary business assets of BlueStar Cleaning, and then split and distribute those assets to the other two listed companies under it in the near future. Knowledgeable sources said that cleaning and membrane related assets may be distributed to BlueStar New Chemical Materials, while the TDI business might be integrated into Shenyang Chemicals.
   With new chemical materials as its main business, BlueStar New Chemical Materials is the future development focus and also the best assets in BlueStar Group. It is also burdened with the task of energizing the group to develop and expand further.

* Projects to be put into operation in 2009 *    

BlueStar New Chemical Materials has turned out many technological achievements and industrial products that related to new chemical materials in China, and is the largest domestic manufacturer of silicone, epoxy resin and high-end engineering plastics. In its annual report, the company states that it suffered great losses in 2008 due to high prices of raw materials in the first half of year as well as high inventory costs and ultra-low selling prices in the fourth quarter. But it also points out that all the factors that landed the company in trouble in 2008 would improve in 2009. In particular, the price of raw materials will plunge by about 50% while the company's selling price of new materials will only fluctuate by about 15%, so its net profit will increase quickly.
   In 2009, a number of projects will be put into operation. For example: the project of 40 000 t/a downstream silicone products (including 107 silicon rubber, silicon oil, silicon resin, etc.) in Tianjin will be completed by mid-2009, and is expected to manufacture about 10 000 tons of downstream silicone products in 2009; the project of 90 000 t/a bisphenol A and 50 000 t/a electronic-grade epoxy resin in Nantong, Jiangsu province has been completed, and is expected to go into operation in mid-2009; the second set of a 60 000 t/a PBT (polybutylene terephthalate) unit located in Nantong of Jiangsu province was put into operation in 2008, but large-scale production will not be conducted until mid-2009. By then, the output of modified downstream engineering plastics will reach around 50 000 tons a year; the PPE (polyphenylene ether) project in Yuncheng of Shanxi province is basically completed and can produce 10 000 tons in 2009; the output of chloroprene rubber is expected to expand from 25 000 t/a to 55 000 t/a; the industrial silicon project is also basically completed, and will be put into operation in October 2009.

* Monomer projects are expanding *     

In 2007, the company built a 100 000 t/a silicone monomer unit in Jiangxi province. At present, the unit is running smoothly and the total capacity of the company in Jiangxi province is 200 000 tons a year. At the same time, the company's 200 000 t/a silicone monomer project - the first phase of its 400 000 t/a silicone project in Tianjin is going well, too. The 400 000 t/a silicone project is being built by a big partnership set up jointly by BlueStar New Chemical Materials, BlueStar Group and BlueStar Silicones International, a wholly-owned subsidiary of BlueStar Group located in France. In the joint venture, BlueStar New Chemical Materials holds 52% of all the shares.
   With various monomer projects expanding consistently, doing a good job in downstream businesses and occupying the domestic market quickly is the key to the success of its silicone business.
   Control of the multipurpose use of upstream silicon resources and by-products is equally important for improving the competitiveness of silicone.
BlueStar Silicon Materials Co. Ltd., a wholly-owned subsidiary of BlueStar New Materials, is a production base for metallic silicon - an upstream product of silicone. At present, it has an annual production capacity of around 25 000 tons, and this number is planned to double in the future. It can now supply only about half of the industrial silicon needed by the company, so the company will have to buy the rest from other companies. In the future, with the expansion of the company's silicone monomer project and downstream deep-processing units, the company will need much more industrial silicon. Therefore, to meet its large industrial silicon demand, the company will enhance the production capacity of BlueStar Silicon Materials in the future and also actively carry out some projects to maximize the comprehensive utilization of silicone by-products.